Rupee falls sharply after Yellen renews call for raising US debt ceiling
21/09/2021
Mumbai, sep 20: The Indian rupee depreciated sharply on Monday after US Treasury Secretary Janet Yellen renewed her call for raising the country's debt ceiling to avoid a possible debt default by the world's largest economy.
“The US has never defaulted. Not once. Doing so would likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency.
Default could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. O
ur current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost," wrote Yellen in her opinion piece in The Wall Street Journal.
“We would emerge from this crisis a permanently weaker nation,” Yellen, who earlier served as US Federal Reserve chairperson, wrote.
"We can borrow more cheaply than almost any other country, and defaulting would jeopardise this enviable fiscal position.
It would also make America a more expensive place to live, as the higher cost of borrowing would fall on consumers," she said, adding, "Mortgage payments, car loans, credit card bills everything that is purchased with credit would be costlier after default."
Yellen did not mention the timing of the default, but had earlier said that a default could come during October when the Treasury exhausts its cash reserves and extraordinary borrowing capacity under the $28.4 trillion debt limit, Reuters reported. Following her article, the dollar index strengthened, pulling most of the global currencies down.
The index measures the greenback’s strength against major currencies. The dollar index rose 0.16 per cent to 93.3420, a monthly high, as of 10.45 AM in India.
The rupee opened at 73.8250 a dollar, down from its previous close of 73.48. At 10.50 AM, the rupee was at 73.6750, brought down by nationalised banks selling dollars, possibly on behalf of the central bank. The 10-year bond yields were relatively stable at 6.16 per cent.
The Sensex, BSE’s benchmark equity index, however, was up 115.21 points to 59,131.10 points, giving support to the rupee.
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